Microsoft's enormous partner network gathered in New Orleans this week, for the company's seventh annual Worldwide Partner Conference (WPC) — which, despite predictions that the economy might deter attendance, drew a sellout crowd of approximately 8,000 from 125 countries. "Everybody seems to want to come," Chief Executive Officer Steve Ballmer declared in his keynote address early in the week.

The conference certainly covered a lot of ground: The company released several new products, updated others, celebrated milestones, and unveiled a roadmap that most analysts seemed to consider very encouraging, especially in a down economy and amid the negative publicity of what one analyst called "The Black Eye" — the product Microsoft prefers to call by its official name: "Vista."

Microsoft has long been recognized for its strong ecosystem, according to Paul Greenberg, founder and president of consultancy The 56 Group. "That's one thing [it's] always gotten," he says, adding that the company has grown in large part by using its partners to "fill the holes." The company, he says, has "a holistic view of the business ecosystem that gives [it] the ability to fill out a partner ecosystem that works very well." That ecosystem, he says, now has Microsoft successfully managing 360,000 partners in the Microsoft Partner Program in addition to 640,000 partner affiliates. According to Doug Hauger, general manager for Microsoft's Windows Azure division, the company receives 95 percent of its revenue directly from its partners.

A recurring motivational theme seemed to echo across the WPC's keynote speeches and conference presentations. For example, Bub Muglia, the company's president of server and tools business, asked partners to see the opportunities amid the tough times and "seize the day."

In his Tuesday keynote, Ballmer highlighted eight critical areas the company is focusing on:

Windows and Internet Explorer, the client-PC;

Windows Mobile and the phone;

Microsoft Office;

SharePoint http://sharepoint.microsoft.com/Pages/Default.aspx;

server and datacenter management infrastructure;

SQL Server and enterprise application infrastructure;

search and advertising, entertainment and television; and

other businesses, most notably the Microsoft Dynamics offerings that include Dynamics CRM.

"We're investing despite the economic downturn," Ballmer told the crowd. "We will keep our [research-and-development] spending flat next year — $9.5 billion in aggregate, which is more than any other company in the world spends on R&D. It is a testament to our belief and our optimism about the future."

The notable announcements from the conference included:

Microsoft Dynamics CRM's million-user milestone

The development of "xRM" customizations

The November launch date for Windows Azure, Microsoft's entry into cloud computing

The technical-preview availability of Microsoft Office 2010

The release of new Dynamics CRM Accelerators

Microsoft Dynamics CRM Passes One Million Users

One million is an impressive number, but some analysts say the excitement may be little more than hype.

"It's almost a bit of an artificial milestone," says Warren Wilson, research director at Ovum Summit. What it does point to, he says, is the fact that Dynamics CRM has seen rapid adoption across its three delivery models: on-premises, partner-hosted, and CRM Online. "Customers can have it the way they want it," Wilson says, echoing the marketing message recently espoused by Microsoft executives in interviews and media reports.

Greenberg calls Microsoft Dynamics CRM a "highly competent and capable" solution, one that generates few customer complaints. He notes, however, that the software's sales and customer service components are significantly more robust than its marketing aspect — a problem that he says also plagues Microsoft competitors Oracle, Salesforce.com, and SAP. Still, what ultimately matters is whether the vendors are able to deliver on customer demands. As Greenberg puts it, "I don't give a crap which of these guys wins the competitive war."

Microsoft Users Customize with xRM

Microsoft also announced new platform-licensing options, and new sales and marketing programs for xRM, providing customers and partners the opportunity to leverage solutions such as Microsoft SQL Server and SharePoint technologies to build what Wilson calls an " ‘anything' relationship management platform."

Wilson also credits Microsoft for having "built so much flexibility into the platform," enabling customers to develop solutions that fit their needs. Industry-specific examples include:

player management;

task force management;

coroner management;

supplier relationship management; and

quality management.

The power of the Dynamics platform is a trait Microsoft has been trying to underscore for some time. At Microsoft Dynamics CRM Incubation Week last December, a handful of companies each spent five days developing an application on the Dynamics CRM platform. Greenberg, who was one of the judges for that event, says now that he was amazed at how the developers were able to create capable, usable applications on the software — an offering that the marketplace rarely refers to as a platform.

Windows Azure Set for November

Microsoft formally announced at the WPC that Windows Azure, its cloud-computing offering, would go on sale at the company's Professional Developers Conference (PDC) in November — more than a year after first detailing the solution at 2008's PDC last October.

Azure aficionados, however, discovered that they don't have to wait that long — or pay anything at all, at least for the time being: Doug Hauger, general manager for the Windows Azure division, revealed at the WPC that a preview version of Azure is currently available for free download.

According to the Microsoft Web site, the Community Technology Preview (CTP) of Windows Azure allows use within certain limits:

Total computer usage: 2,000 hours

Cloud storage capacity: 50 gigabytes

Total storage bandwidth: 20 gigabytes/day

"The goal of Azure," reported ZDNet blogger and longtime Microsoft watcher Mary Jo Foley, "is to provide developers who want to write applications that run partially and/or entirely in a remote datacenter with a platform and set of tools."

During Tuesday's keynote, Hauger explained to the audience that the purpose of the free period is "to build the market momentum for all of you, as partners, to start learning the skills, building the applications, getting on top of the platform, building your services practices, and really understanding how it integrates with your business[es]."

Partners currently tinkering with the Azure platform, Hauger said, were "positively surprised by how easy it is to put solutions onto [the platform]." In addition to ease of use, he said, Windows Azure is intended to:

help companies focus on driving revenue instead of building datacenters and maintaining infrastructure; and

increase efficiency of time and resource allocation (Hauger cited Microsoft-sponsored studies suggesting a shift in deployment from on-premises to the cloud can produce savings of as much as 65 percent in total cost of ownership over a three-year period).

When the free trial period ends in November, two variants will be available — a basic edition ($9.99 per month) and a business edition ($99.99 per month, including a 10-gigabyte database) — and consumption-based pricing will kick in:

$0.12 per hour for computing;

$0.15 per gigabyte per month for storage.

Hauger had one additional tidbit of information to please the crowd in New Orleans: Members of the partner network will receive a discount on the consumption-based pricing.

Wilson says that, even though the plan sounds very promising, he's concerned about Microsoft's decision not to release the product for general availability until November. The intervening four months, he says, gives competitors more time to establish momentum around their online offerings. You can be sure, he says, that Salesforce.com and even Amazon.com will take the opportunity to expand the footprints of their own offerings as much as possible. The established players in the cloud-computing market may make Microsoft seem like a late arrival in the eyes of early adopters, Wilson says, but the market's relative immaturity means there's plenty of time for Microsoft to catch up.

"The best days are still ahead and Microsoft's going to be a strong competitor," he says.

Microsoft Office 2010 Available with Technical Preview

With competition intensifying from online competitors — notably Google's Google Docs offering — Microsoft announced at the WPC that it's finally bringing its popular Office suite of productivity tools online. On Monday, Microsoft is opening up Microsoft Office 2010 and Visio for testing to tens of thousands of people as part of its Technical Preview program.

The 56 Group's Greenberg, an admitted Office fan, says the software takes some getting used to, given its sophisticated functionalities. The complaint about Google Docs, he says, was that its functionalities were limited, but Microsoft is hoping to find a middle ground — not by dumbing down the overall offering, but by making it possible to shut off certain features. Given the ongoing popularity of the on-premises version of Microsoft Office, Greenberg has no doubt that, "if — and that's a big if — Microsoft can offer the same capability that Google Docs offers...people are going to go with the familiar."

Some Microsoft competitors are hoping that familiarity will breed contempt. Zoho, one of the upstart providers of on-demand productivity applications, responded to Microsoft's WPC announcement with some rhetoric of its own. (Read Zoho Chief Executive Officer Sridhar Vembu's post here.)

The industry's growing affinity for cloud-based applications forced Microsoft's hand, Wilson says. "If Google weren't there with Google Apps," he says, "Microsoft would have preferred to keep Microsoft Office on-premises, but [Microsoft executives] see the movement." Just as Microsoft couldn't ignore the demand for online applications any longer, Wilson says, the Googles and Zohos of the world now have to keep an eye on Microsoft if they want to survive.

Portal Integration Accelerator — allows organizations to connect Microsoft Dynamics CRM to their online business processes through what the company describes as "point-and-click configuration," rather than Web development.

"They've done a very good job with the Social Accelerators," Greenberg says. "It's limited, but it's a start." He adds, however, that Microsoft's social CRM component was long overdue. "[Microsoft has] been exceptionally slow," he says, attributing the delay to two overarching factors:

A greater stake in old-school software. "They pretty much owned what was the traditional infrastructure," he says. Entering the social world, he adds, Microsoft is now "talking about integrating with things [it has] no control over."

The bureaucracy of being a large enterprise that comprises many siloed divisions.

Having finally connected Dynamics CRM to social media, analysts say that Microsoft's next challenge is to keep the momentum going. Wilson argues that the opportunity window may not have been as small as it seems, just because Salesforce.com jumped on social integrations earlier. "It's a good thing, it was time that Microsoft did this," he says. "But I don't think the fact that they had not done it until now had cost them anything in particular."

"The best thing Microsoft can do is announce partnerships with social monitoring platforms," Greenberg says. "Integrate with those and [the company] will be caught up fast." (One of Microsoft's first big social moves was an integration, announced at Convergence 2009, with enterprise social computing vendor Neighborhood America.) Greenberg says that, as one of CRM's Big Four — along with Oracle, SAP, and Salesforce.com — Microsoft's size may help the company catch up, but size can be a double-edged sword.

"They're not going to lead the space," Greenberg says. "They're going to be players. I don't see them leading it."

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